Old, old debt brings new collection effort: Legal?

Federal, state laws limit collectors in chasing you over ancient debt

By Tanisha Warner

Credit Care

Tanisha Warner is the communications manager for Money Management International, where she manages educational content designed to teach consumers about personal finance topics. She writes "Credit Care," a weekly reader Q&A about debt issues, for CreditCards.com.

Dear Credit Care,
I had a car lease from January 1998 to January 2002. The bank claimed I had $420 of late fees owed them over the four-year term. In December
2011, a collection agency put a collection item on my credit reports for this. I have sent them and the agency documentation proving that this debt is over 10 years old. The car was returned as contracted and sold by the bank. All documented. They say the collection agency just bought the debt in 2007 so it will remain till 2014. How is this legal? -- Sandra

Dear Sandra,
The
Fair Credit Reporting Act
(FCRA) states that the reporting period for a debt begins at the date of delinquency and runs for seven years (for most debts, including your collection item). If you have made no payment on the car lease since January 2002, the reporting period for the debt has ended. It does not matter when the collection agency purchased the debt. The reporting period is based on the original account. Once a debt is placed for collections by the original creditor, the debt can be sold and purchased many times by many different collection agencies. However, the FCRA clearly states that the reporting period for a debt is based on the original date of delinquency defined as “upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action."

In the case of your lease, what most likely happened is that the late fee(s) was added to the following month’s payment. If you sent in the regular monthly payment, without the late fee, it was likely rolled over to the next month. By the time the end of your lease was up, any late fees that were not paid would have been added to your last lease payment. Again, if you made only the regular monthly payment and did not include any late fees, the payment would have been considered delinquent because it wasn’t paid in full. The reporting time frame for this account would have begun 180 days after your last payment date, because it was not made in full, was still owed and therefore delinquent.

The FCRA states that you can request from the credit bureau that is reporting the item you are disputing a "description of the procedure used to determine the accuracy and completeness of the information." If you have not done so, I would make this request. What you need to prove to the bureau is that the bank that held your lease charged off the amount they claimed you still owed. This would typically have occurred 180 days after no additional payment was received, which would have been more than seven years ago. If no information was provided by the bank to the credit bureau, you might consider contacting the bureau and disputing the information again. In the meantime, you can write a statement of 100 words or fewer and ask that it be included in your report to explain your side of the story on this collection item and the bureau must mark the account as being disputed by you in future credit reports.

The other issue you have is the collection agency’s attempt to collect the debt. The statute of limitations has passed in all states to collect the debt using the courts. I would recommend that you contact the collector in writing and state that you are disputing the debt and that the statute of limitations has passed for collecting the debt. Request that the collector not contact you again regarding the debt. The Fair Debt Collection Practices Act provides that the collector may not contact you again if you have stated that you do not wish to be contacted, with the exception of letting you know of any other action they may or plan to take.
Should this item on your credit report prevent you from getting the credit you want or need at the terms you can afford, you might consider paying what is owed.

Tanisha Warner is the communications manager for Money Management International, the largest nonprofit, full-service credit counseling agency in the United States. She manages educational content designed to teach consumers about personal finance topics. You can find more money management advice on Blogging for Change and MMI's Facebook page.

Published: June 4, 2012

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